>> the first half of 2023 has surprised us to the upside. >> can this ai and uber-led rally continue? >> there's a lot of disinflation in the pipeline. >> would like to see balance between tech and the rest of the market. >> these names that have run up this year, you have to be cautious here. announcer: this is "bloomberg surveillance." jonathan: get your day started. live from new york city this morning, good morning, good morning. this is "bloomberg surveillance." alongside tom keene, i'm jonathan ferro. slightly negative on the s&p 500. much more on the net -- on the nasdaq. let's start with naz -- with

netflix. tk, subs not bad. upside surprise. but the outlook for revenue, not so great. tom: i'm going to link it together with tesla, i thought paul davies of bloomberg was outstanding. they all have one thing in common. profitability. that is going to be the earnings mantra for me going forward. you have the revenue dynamics. netflix, ugly. some challenged, others not. jonathan: that sets up tesla perfectly. they are willing to take it when it comes to margins to some more vehicles. at the same time there was this soft spot the team at bloomberg picked up on. inventories taking up just a little bit. tom: oh, no. it is more than a tick up, it is a hockey stick. when i noticed there -- and this goes back to the distrust of tesla.

i'm going to call it constructive distrust of, what is the accounting? what are the other incomes? what are all of the rationalizations of profitability? it is not like procter & gamble. jonathan: the stock is down 3% before earnings yesterday. tom: netflix human shot. jonathan: that's going to be a big struggle for tech. next week, alphabet alongside christophe. on wednesday met a. -- meta. these are big names that have seen big gains year today. how do you validate those after you have seen such massive moves here today? tom: yesterday moving apple with a moonshot. the stock came back down. i think it is above $3 trillion right now. you can look at that in the bloomberg terminal. the des screen.

smart people like mark gurman are looking -- and this is something absolutely new for natural tv and radio -- they are actually looking at their business plans. it is the business plan of tesla? could you see jon ferro in a tesla -- what is it called, a cyber truck? jonathan: yeah. tom: when will it make money? jonathan: they are going to get rolled out in the next 18 months. a huge demand for them, tom. massive. they look equal. you don't think they look pretty cool? i remember when they were first rolled out. do you remember that demo? they threw the rock through the window, and everybody laughed about it. tom: i think david ricardo has ordered one. jonathan: david? would you like to do the promo? tom: no, you do it, you will get it right. jonathan: 6:45 eastern time, about 42 minutes from now. still part of red bull, but he is going to scuderia alphatauri

for the rest of the season. he was doing this tire testing with daniel over at silver stern in the red bull, and within 11 laps they just knew, he's still got it. and they made a move quickly to get in the sea. tom: good morning, america come on this. why are jon and i doing aston martin, all of the rest of the people we have talked to? it is a huge global audience, and the business of it is extraordinary. there is no bounds to how gm, cadillac, or honda want to get into the game. there is no other sport equivalent right now. jonathan: do you think we can get bloomberg surveillance on the side of a scuderia alphatauri? tom: i have to talk to mike this week and see if we can get a bloomberg. jonathan: we will see if he

bites. tom: stop him in the hallway. hey, mike, $5 million. jonathan: let's check out the price action. a bit of data later this morning. jobless claims this thursday comes at 8:30 eastern time. we need to sit on the bond market for a moment. yields have come lower. let's be clear about that. we are down right through the curve. one thing has not changed. to stand is still deeply inverted. tom: i'll bet you grinned at the news flow. this is front and center. the re-inversion of the twos 10 spread. to go from a -111, up to a constructive -94, and we have pulled back to -102 now. higher than the 10 year yield. jonathan: the euro clinging to

112, slightly stronger today against the u.s. dollar. on my screen at the moment we are at 11210. joining us now is linda duessel. federated, earnings yesterday from tesla. going to be so hard to validate such massive gains you today. how much of a challenge you think this tech stories going to be? linda: some of these mac -- of these names were in the magnetosphere that -- the magnificent seven and were easy to jump onto. i think it is expected that we should have a consolidation in here, and not to talk about any company on a name by name basis, but the healthiest thing would be that if money started to flood into the market and broaden -- and we did see the equal-weighted s&p outperformed the market cap s&p in june.

so, a bit of a pullback here. it would not be a bad thing to move away from the nasdaq. tom: if we see earnings lift up, do earnings lift up because of margin surprise, or do earnings lift up because of a revenue left? linda: that is the interesting question. we do hope that earnings will go up, because profit margins have been declining for 15 straight months here. and from an all-time record high. but we really want those profit margins to stabilize, at least stabilize. and there is evidence of that. in terms of the revenue piece, that would be a very good sign of a continuing strong economic situation, because you have seen inflation start to slip a bit here. and that can challenge the revenue line, and that can challenge the overall earnings picture. that is why, here we are in the midst of the earnings season, and we are looking particularly

where the margin line is concerned, what companies are saying about their outlook. it is an interesting time for a pullback to be expected. tom: the fundamentals that federated are coddled. you have led the charge on that. on a factor basis, which factors matter forward? is it growth? which factors matter? linda: the most important things going forward are, can we have the mild economic recession which we at federated hermes have been calling for, and maybe toward the end of this year, just a mild recession, and inflation continuing to grind down? enough to where jerome powell says, i can stop raising interest rates? it is mainly about inflation and the strength of this economy and the resiliency we keep reading about. we still have a lot of money

flowing through the system. that is a challenge for inflation. we need to have that role through. we need to have unemployment rise, but not too much. it is more of a balancing act of all of these things. the fed and their tightening campaigns historically were unable to give us a soft landing. maybe we get it this time. jonathan: help me understand this story when it comes to topline revenue growth. this is something thomas focused on. when we had inflation we had guest after guest tell us we live in a nominal world this is going to be good for topline revenue growth. and now we have disinflation and we are told this is good for earnings. can you tell me the relationship between disinflation and revenue growth? topline s&p 500 companies? linda: disinflation is something we are rooting for. 2% inflation is goldilocks inflation. when it comes down that is good news. if you are a company you have

expenses, and some of the biggest expenses that you have will be your labor expenses. lots of people, as we know, have been able to get excellent year-over-year wage hikes the likes of which we have not seen since the 1970's. we look particularly at the atlanta fed wage tracker. you are still seeing employees getting wage hikes. if wage hikes come as inflation starts to slip in the revenue line starts to slip on a nominal basis, that is bad news for corporate earnings, which is what we are bidding on when we bid on the stock market. so that is kind of the tough spot for companies, and something that happens in every cycle as you get to the further end of the cycle, where expenses are higher. jonathan: are you backing away from labor-intensive sectors on the s&p? linda: well, i would not say

necessarily that is to be the case. i would say that it is more of a garp situation. do have some favorite sectors that are inexpensive, but it is very important to watch company by company. it is a stock picker's time right now. i would not say any one particular sector i would avoid because they have a problem there. if i were an employee being paid a little too much versus what i am worth and may be nervous here, because when unemployment starts to rise historically it goes fast. jonathan: final sector right now, favorite, what is it? linda: i'm just going to tell you right now we are seeing the economy potentially get slower. let's go through the high-quality dividend starts. they are dirt cheap and you're going to like them. if the fed does what it always does, which is put us into recession. jonathan: linda do so. thank you. with a message for chairman power. tom: it is your fault, jerome.

jonathan: have you seen our survey on the federal reserve? ultimately the average forecast now is for one more call, one more hype next week, and then we are done for the rest of the year. see if that changes. tom: i'm going to go with the done part, and the use of not cutting rates. it is extremely efficacious to get what you are and keep rates where you are for one meeting, two meetings, three meetings. that alone, the entertainment into 2024. the idea of, when did they cut rates? i don't have that framed in my mind yet. jonathan: people are putting out march of next year. i remember when it was later this year as well. bank of america's michael capon says more to come. july. that is going to be the last hike of the cycle.

this is what he has to say. decelerating economic activity, tightening windy conditions and the banking sector, and greater evidence of disinflation will be more prominent in the second half of this year. in their view ultimately it will dilute conviction for further tightening. that is the call from bmp. tom: a cautious view on the equity market as well. i'm going to look at the data. we have some data today. some housing data next week as well. the truth is, where we are in the calendar, we stagger into the july unemployment report, in shock of shocks, an inflation report out there somewhere. jonathan: summer is going quickly. where did brammo go? tom: the truth is, what is amazing about what she is doing

is -- jonathan: is she doing a cruise? are you serious? tom: she has always wanted to see greenland. jonathan: what is she up to? tom: i don't think she is doing the thing in norway. she is over in greenland. she is out what the polar bears walking around. jonathan: just for the record, you are saying that the fjords are for all people? tom: yeah, you sit there with a martini and go, oh, oslo. jonathan: she going to do a phone interview? is she going to call in? tom: [laughter] jonathan: from new york, this is bloomberg. ♪ i was hesitant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years. when i finally could hear for the first time, i started crying. i could hear everything. call 1-800-miracle and schedule

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>> only a small percentage of our members are on the ads tier. and we are really early in terms of impacts, including extra members, for the reasons that greg mentioned. jonathan: that was spencer newman, netflix cfo. subs coming in way better than expected relative to the estimate in our survey of analysts going into the report. the revenue a little lighter. the stock this morning as negative by about 6% at the moment. netflix down by 6.3%. tesla making a comeback. it was some disappointment after close yesterday, but we are only

down 3%. tom: i look at this on a standard deviation basis. we don't do math on thursdays, but the bottom line is, these are trivial callbacks in the expectation moons shot we have seen out of stocks. jonathan: and barely making a dent in the s&p 500 this morning. we are negative by .1% right now. no drama whatsoever. going into data later this morning, jobless claims about two hours away. tom: i'm going to look at levels here right now. i have a dow close, 35,000. nasdaq, 15,800. these are grudging bids, even when the markets go down. i don't sense a giveaway. jonathan: we're talking about a market up by 40% year-to-date on the nasdaq. if that is a disappointment you

would expect that to be down a little more than just .6%, right? i don't know what that tells you, but it is something. tom: i think i can speak for the pros. what the pros do is not just look at the last six months, but where are we pre-pandemic. geetha ranganathan's expert at this. have you seen barb yet? geetha: [laughter] no, not yet, but i'm looking forward to it. it is actually going to be the double feature. tom: there is barbenheimer and all of that. there is a ken surveillance. it is a different can then what you had in the 60's. -- 1960's. i don't have faith in the profitability stream. they succeed wednesday, they fail at this, etc. can you develop a persistent free cash flow? can you develop a consistent he

bit the off of -- ebitda? geetha: they have shown as they can. obviously the content business is a hit or miss business. it is very impaired people, but if you look at that report yesterday and looked at the free cash flow story, this is a dramatic turnaround in what netflix has been able to achieve. get the operating margin leverage. we are seeing a lot of free cash flow leverage. this is exactly what you want a steaming model to look like they raised their free cash flow guidance, and there is going to be lumpiness. we are looking at over $5 billion in free cash flow. going into 2024 we think it would be 6.5 billion dollars in free cash flow. this is going to be a sustainable cash flow story for many years to come. tom: do they have the ability,

do they have the elasticity to raise prices? can netflix ruin my afternoon and come up one dollar or two dollars per month? geetha: they absolutely can. at the end of the day if you look at the depth of content i think netflix is still fairly underpriced. they do offer a very compelling value proposition, just looking at the amount of content they have, and they going to keep adding to it. remember, the labor strikes, while they are not good for the industry, they put netflix in a competitive advantage, in a sweet spot relative to its peers. it will be hurt if the strikes prolong into 2024, that i think they are going to do well, and that is probably going to give them more pricing power. jonathan: what did they say about that yesterday? geetha: so, this is one thing --

i think the takeaway from the earnings report is that this whole password crackdown initiative has definitely got off to a very good start. so, execution is good. it was a bit of a balancing act they have to do when it comes to subscriber growth, as well as revenue growth. what we are seeing this year is going to be new subscriber growth. as they get that benefit of subscribers were going to be able to see them to increase pricing to increase revenue. i think the revenue growth becomes off of a to four and 2024 story. jonathan: to put prices up you need a deep catalog and a lot in the pipeline. you have brought up the writers strike. what did they say? how long does this need to go on for before it becomes a problem? geetha: it's not going to become a big problem for netflix for a considerable period of time. we have seen them go through a similar situation.

not exactly the same, but we have seen them having to deal with a hole shut down production during covert, and they still held up relatively well. they do have a huge backlog, a huge content pipeline because of very long lead in production times. the other thing they benefit from is, they have a lot of foreign content. a lot of content coming from spanish-language markets, from south korea. they have been able to diversify that well. they are not hugely dependent on hollywood. but of course it will affect them. i don't think they're going to see any adverse impacts until the latter half of 2024. tom: what does the rest of l.a. media do given netflix's performance? are they having meetings today going, who do we merge with? geetha: media is under tremendous pressure. we are seeing the linear tv business almost on the verge of collapse. i think the alarm bells really

went off when bob iger just spoke about how the linear tv assets are no longer cord to disney's business. this is something unimaginable, right? linear tv is under considerable pressure. good thing with netflix is, they are the cleanest story in media right now. most of these other companies are having to manage this transition from linear to streaming. it is a different problem for all of them. they have to manage a declining linear tv business, they have to show profitability on the streaming side -- something netflix has managed to do well. it is going to be very hard for the media companies. consolidation is in the cards. jonathan: is that consolidation, disney basically consuming all of hulu and keeping disney plus? is that how it works over at disney and the rest is up for sale? geetha: so, yes. in a nutshell, yes. disney is going to buy hulu.

the price point, of course, we do not know yet. i think it will be upwards of $10 billion. everything other than espn is for sale. that is exactly what bob iger has said. the question is going to be, who is going to be willing to buy it? tom: one final question. it is urgent. who is going to get otani? did the dodgers just pick him up? day one they pay for it? geetha: i wish i had the answer to that question. [laughter] tom: ok. prep next time. come on. [laughter] jonathan: geetha ranganathan. we will catch up with her later this morning. netflix up 62% through the close yesterday. we mentioned hulu. i just brought up my credit card statement. tom: this gets john cowan. jonathan: $82.99. tom: ridiculous.

i have youtube tv, and every single day i look in the house at how no one is watching it, and i'm like, how can i get rid of this? off the top of my head, $56. jonathan: paramount, $4.99. tom: add it up. it makes comcast 20 years ago look cheap. i don't get peacock. jonathan: peacock, $4.99. that is going up. tom: it is an outrage. coming back, we will look at our food expenses, the barbies. jonathan: we need a bundle. ♪

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jonathan: equities this morning look a little something like this. your s&p, you're nasdaq 100, the s&p -.1%. the nasdaq down by .6%. we will dig into the nasdaq in a moment. this just in from hsbc. we extend our constructive starts on risk assets as fundamentals are still supportive. this support is likely to be sustained until late summer. and then he is looking for inflation to rise again. tom: this is out there. jonathan: perhaps a problem lurking there. it is not someone who has been

super bearish. they are saying may be a little bit more to come through the summer. tom: i can't decide who it was, what a very smart couple of paragraphs. also in october we have medical cost adjustments, which will be an inflationary pushback against disinflationary tendencies. maybe that is how you get stability in price or a lift. jonathan: student loan payments resume too, tk. it is just on the calendar, on the horizon. tom: i agree. we are not going to go through all of the earnings right now. these guests are too important. j&j, we will get to it. comes up. united, thumbs up. jonathan: d.r. horton, just now. bps. revenue, $9.73 billion. upside surprise there for d.r. horton just months ago. let's turn to the bond market

briefly. the two-year looks like this. yields up four basis points. the 10 year looks like this, 3.7 a. that curve has gotten inverted this morning. deep inversion. tom: 98, 99, an inversion down. that is important as we wait for the data in two hours. jonathan: let's push it forward to the euro and fx market. the euro had that long winning streak on the euro-dollar. still clinging to 1.12 on the currency pair. just want to turn to the single names out there at the moment. netflix and tesla. netflix at the moment down by 6%. the outlook for revenue a little weaker. that name is struggling. not struggling you today. year-to-date it is still up 62%.

tesla chasing volume over profit. elon musk is not shying away from that. the name is down 2.9%. relative to a 130 5% move year-to-date on that name? here is another one. it is an airline, united. it is up 2.9%. united airlines liking what it sees for international travel. i think many people listening to that show right now, living it. tom: i have a relationship with united airlines. got kirby sent me a love note they are rapidly expanding across the pacific ocean. it is something out of the 1960's or 1970's. i can't remember all of the names. hong kong, tokyo. they are adding flights as part of what we see there, even with the travails at work that we see . jonathan: i know you like united. tom: i'm not a fan, it's just

the choice i have. that is the choice. jonathan: you will go from manhattan? tom: it is better than o'hare, that's when i look at. jonathan: here is a quote. i'm skeptical this is the beginning of a prolonged cycle of dollar weakness. i think you need to see the u.s. market due to rib -- labor market deteriorate rapidly or see police growth prospects improve materially. that is the pushback from wells fargo this morning. tom: erik nelson joins us this morning. i want to go down the page away from the majors. you have a beautiful set of paragraphs on what the adults look at. it is actually how i met young jon ferro five or six years ago. that is strong swiss franc. what does strong swiss franc indicate about the foreign-exchange continuing? erik: i think there is two things to consider here. for one, the swish -- the swiss

national bank is actively buying this currency. they are not shy about it. that has been driving some significant overvaluation. what is also strange as, risk on, risk off, equities down, equities up, it doesn't matter. the swiss franc keeps getting stronger. at this point i think it has come too far too fast. you look at the payments data. especially considering the risk on environment. i want to fade the swiss franc straight -- strength. tom: how does it change your analysis that a given central bank, and the swiss national bank has something like 90 gazillion dollars in alpha, alphabet, and the rest? does that change your analysis that they are running a sovereign wealth fund within the bank? erik: i think they are certainly keen to downside some of the

massive portfolio expansion may have seen in the past 10, 15 years. of course, that is part of the other side of the equation. but i kind of think about the inflation target for the swiss national bank. 2% actually being a ceiling. they're pretty much the only central bank in the g10 achieving their inflation targets. that is key. in my opinion, in terms of shifting their opinion, they are starting to get comfortable with how much strength they have seen and may start to ease up. tom: your call is broader fx tradable? are they tradable or are there certain pairs were you can get figure moves? erik: dollar-yen is going to be interesting into the meeting next week. the excitement about ueda's speech, it is a signal the boj is not going to do anything.

what we have seen ahead of the last two or three meetings, the bank of japan is explicitly signaling it is not going to do anything. we have not heard that yet. to me next week is it still live and there is potential for big volume in the direction of dollar-yen. tom: ferro salute -- is looking at me the way brammo looks at me in the middle of an interview. is it true that you waiter has major english skills? is the analysis different because ueda's more day-to-day accessible? erik: we saw this earlier this year. in terms of the communication, the shift from -- shift to patient monetary -- you want to focus on when they do. i do think there is still potential for more changes to policy. question for me is, what are those changes?

if they are going to move yield control -- yield curve control, how much sustained strength are we going to see? jonathan: let's put a bow on it. the base case for you, you just don't buy what the dollar bears are trying to sell? what are they getting wrong? erik: it is twofold. one is the fed cuts that are prized. it is completely realistic we will be in a u.s. recession late this year, early next year. the extent of tightening, at some point we do think the recession is going to come. but to see 200 basis points of cuts prized for the u.s., given where the labor market is i think there is room for that to be reduced. i also look at the growth picture. europe, china really not inspiring me. and the policies we have seen from china buspar -- thus far has been underwhelming. u.s. growth has been up. jonathan: let's talk about

inflationary trends as well. i spoke to someone recently who expects inflationary trends to diverge. you saying they converge, they diverge? what are you expecting when it comes to price pressure? erik: i think for europe there has obviously been a significant softening in underlying pressure. in the u.k., yes, we have come off a little bit, but i do think that it is still at 6.8, 6.9%. that is pretty high. the question for me is, what is the bank of england going to do about it? they have been hesitant to step up and being led by the market. they are going to downshift, and i do start to worry more about inflation expectations, market-based in the u.k. that is one of the most important indicators you need to watch. especially given the fiscal situation in the u.k. tom: what is cable going to do

here? give me a point. erik: i think the trade you want to be in for a longer period of time is being long euro against sterling. but i do think that in the short term, in the next few weeks or so, because of how far dollar weakness has gone, i think cable has another couple of big figures to run. at that point maybe people reassess. i think the carry story maybe supports sterling for a little bit longer. but i do think that the longer-term the euro-sterling story makes sense. tom: that does not get us out to arsenal/tottenham. i don't think i can do that off the trade erik is arbitrage in. jonathan: eric nelson of wells fargo. thank -- thanks for that.

pushing back against the gloom. can we return to d.r. horton? this homebuilding in the united states you today is up 40%. it is enough -- it is up another 8% in the premarket. revenue close to $9.7 billion. that is a monster upside surprise. and then the outlook. ac full-year revenue, $34.7 billion. previously they had seen $31.5 billion. we are talking about a big beat and big race for a homebuilder at the same time we are seriously having conversations about the prospect of recession. it is that hard right now. -- on right now. tom: you get some macro economics to make it pop, but we forget we are so focused -- folks, i am as guilty of this as

anyone. apple, apple, apple, tesla, netflix, whatever. pouring dh horton up at 1% per year over the last 10 years. their tickets to the texas rangers are outstanding. other than that who talks about dh horton? they are up apple-like and they get none of the jonathan: who would have guessed that 5% interest rates for the federal reserve would support this name, not heard it? who would have guessed that based on the fact that rates are now so high that if you have 3% over 30 years you are not moving? a have suffocated supply in housing in america. and all of the homebuilders are loving it. tom: i'm going to defer to bloomberg intelligence on this. the bottom line is, they are also servicing the upper decile,

or upper quintile of america, that clearly is prospering amid this 2% gdp. in hindsight it is a great story, but i really take issue with the myopia we have on focusing on exactly seven names. brammo does this better than you and me. we are pretenders. jonathan: we are trying to pretend right now. [laughter] we will talk tons about the seven over the next week when we -- when the rest report earnings. but discretionary spending, airlines. tom: united. united, we are laying down in newark in terminal a. life is great. boom. killing it. jonathan: can you afford a ticket to the grand prix this weekend? tom: i'm looking at it. they built this thing like 35 years ago short. monica was the plan, and the

jargon for this among those in the know is monaco, which we know from james garner and famous american movies, it is monaco without the barriers. all of a sudden i'm interested. i might have to watch the practice tomorrow and qualifiers. jonathan: qualifiers? you are pretending really well. i'm impressed. coming up next, wonderful daniel ricciardo. he has his seat back. really cool stuff. we will catch up with him in just a moment. ♪ well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

>> it is frustrating to be on the sidelines and watch. that is also building this fire and that desire. the plan is to buy myself a seat next year. i don't want to just be there.

i don't just want to get a seat to say i am an f1 driver. jonathan: that was daniel ricciardo about two months ago. looking for a seat for next season. we have some good news. he has a seat for this season. at alphatauri. tom: we welcome all of you worldwide. from the guy who made major headlines three months ago, styling at the met gala. [laughter] he is doing a little better than the met gala with the beautiful people. it is daniel ricciardo. jonathan: daniel ricciardo joins us now, formula one driver for offertory -- for alphatauri. congratulations. it's going to be fantastic to see you in a seat this weekend. i want to go back a couple of weeks if we can. he went into the car to do some tire testing in red bull at silverstone. for many people they assumed that was the game changer.

can you tell me what it was like to get in the seat, and have a create came back to you? -- and how quickly it came back to? daniel: first, thanks for having me back. appreciate it. it kind of gave me everything i wanted to feel again. i had not driven sense -- since the last season, so it was about eight months. i was very curious. i was like, i'm probably going to feel rusty, what i had also been doing a lot of work. i had not driven the physical car. i got in, and it felt like normal and natural again. it went really well. i think that was the last box that needed to be ticked to confirm the come back. jonathan: what kind of lifetimes were you putting in, and how long did it take to put those kind of lap times in? daniel: it went well.

it went well. so, the very first lab i did, i was like, this feels fast. i haven't driven this fast in a long time. it is like your brain and eyes need to readjust to the speeds and everything. let alone your body, the physical forces. the first lap felt like a bit of a shock to the body, and then from that point i quickly got back into it, like, it all felt normal again. i did one ramp just to get my iron. that was about six laps. then the next round we put on some new tires, and that is when i am a the first lap i was pretty much down to the pace. jonathan: i hear it is better than that. what i have heard is that it would have put you at the front of the grid at silverstone on race day. is that right?

daniel: it was good enough for a front row. jonathan: amazing. daniel: i was like, look, i obviously believe in my ability, but i know that being out for a while there is going to be a few cobwebs to dust off. i did not expect for it to go that good. i was grinning from ear to ear. tom: i ponied up 120,000 dollars last week for the simulator. we see it on the next next -- on the netflix movies. you guys are on the simulators wasting time from photo shoot to photo shoot. explain what a simulator cannot do. i am fascinated from your leap from simulators to budapest, which some people say is monaco without barriers. it is the jump from simulator to actually doing it? daniel: it is still illiterate

-- a legitimate jump. the simulators now are very good. the team's purpose-build them. these are not simulators you can have in your home. they are beyond next level. so, they feel, like, you can kind of get -- i mean, i would probably say it feels 80%, 85% of the real thing. so, it gives you enough of a feeling and idea. so, it helped me get up to speed, but there is no physical aspect of the simulator. you do not get the g forces. there is a lot that is still -- you know, tire management and all of that stuff, that is all on-track, real stuff i have ahead of me this weekend. it has prepped me, but i still have a few things to be on top of. jonathan: let's talk about this

weekend and beyond. you are at the top of the pack, top of the standings, alphatauri. you know how to get it done in a slower car. come a about how you were going to define success. -- you are going to define success. daniel: it is really, as you said, the car i drove last week was the best car on the grid. in a way part of me needs to remove that feeling, but getting into that car last week i was just -- i just kind of jumped in, i was just like, let's see how it goes. let's drive, boost my ability, have fun with it. that is the approach now. i think it is so easy to overcomplicate it. yes, this team is having a difficult season, but i think the approach for me needs to be go out there, drive it, and work

on weaknesses. i think i just need to focus on getting the best out of myself first. tom: i noticed at silverstone lando noris is getting all of the love. florence pugh. there is no question about this. you have been through the ups and downs of this. jon mentions budapest, and i think austin is out there as well. is this a sequential process you have to get back into it? or is this something you can practice tomorrow, nail in the qualifiers, and get something done on saturday? daniel: i would say realistically it is a bit of a process. i can't probably expect everything to fall into place on the first weekend. but let's see what happens. jonathan: i have never seen you this modest in my life. [laughter] let's finish on this.

hopes and dreams. i know you have many. have you got your eye on that second seat at red bull? tom: so rude. daniel: that is where i would love to get to. this, for me, is an opportunity back in the rebel family. i know if i can capitalize on this it could potentially lead to that. so, this is all part of it. jonathan: daniel, congratulations and good luck for race weekend. next time you're in the states dropped by new york. we can catch up. january kyoto of alphatauri. tk, just very cool. tom: this is much to your heart and soul as well. to me it is the race course he is going to beyond, which seems to be really challenging, really bumpy. it is a dry course, and once you're there you cannot be like sergio perez and started 15 and go up seven notches. the tension alluded to, it is in

the practices, in the qualifiers. jonathan: he played it down. to go from the simulator to the actual car and put in lap times after something like 10 laps that would put you at the front of the grid is just amazing. from what i understand based on reporting, that the driver that had the other seat at alphatauri , literally 10 laps into daniel ricciardo testing, they made the call and brought him back. it was that fast. tom: this is part of it. you see in the netflix series as well. there is 10 teams, there is 20 chairs. it is not like major league baseball where you have 42 guys in the bullpen. jonathan: next level. tom: it is more than tennis, more than cough. jonathan: you go from carting as a kid all the way through and hope -- and some people can only dream of getting one of those 20 seats. tom: before we came on we were

talking about western australia and the dust and carting. someone like max first happened, who is the otani of f1, he has been doing this since he was eight years old. can i state that they are not normal? jonathan: it is helpful if your dad was a racing car driver as well. tom: you know. jonathan: you have to put a lot of money into this. stuart kaiser, good luck to you. he is going to join us shortly on the equity market. we will get calls on race weekend, and hopefully the s&p as well. yields a little bit higher by four basis points on the 10 year. i couple of names you need to look out for. netflix is down about 6% following earnings. the outlook for revenue not so great. tesla down 3%. elon musk admitted to chasing growth in volume, and nonprofits right now. from new york, good morning. ♪

>> the first half of 2023 has surprised us to the upside. >> can this rally continue? >> we would like to see improvement. >> these names have run up this year. jonathan: good morning, good morning. for our audience worldwide, this is bloomberg surveillance.

i am alongside tom keene. some of the action is not in big tech. early trading, it is a be in a raise from another homebuilder. tom: a lot of stories about american enterprises, some of the soyuz we have been alluding to our good as well. full disclosure, ancient family connection to the wonderful keycorp. they are not getting it done. it was flat for the last 10 years and they did nothing round trip with all the bank struggles. coming out of this earnings season, is 2023, the year of the roll up. when does it start? i am waiting right now.

jonathan: american airlines this morning and the estimate is 159. this is what they see now. this was the range that they had previously seen. there is another one, tk. tom: you are just trying to move up. tom: we will pay attention to the earnings and we are thrilled that we have bloomberg intelligence, among others to help us as well. my data story of the day. jonathan: let's call it 380 by four or five basis points. we are a week away from a federal reserve decision. potentially another hike from this federal reserve.

tom: i would focus on the modeling of rate cuts. all of that will hinge on data and we have had a number of people fall into a camp that says disinflation, bringing it down to 4%. jonathan: you can find consensus on a few things, but we are in a sweet spot. extending a constructive outlook. fundamentals are still supportive and it is likely to be sustained until late summer. good morning. we want to talk about formula one and race week. is there a sweet spot for the data? >> we have had massive surprises.

the fed seems comfortable hiking slower or being completely done. if you can put all that together, it has been powerful. it is getting people to broaden out. jonathan: massive gains. discretionary spending is going to be the focus. cannot kind of consumption continue to support those cyclicals? >> that is when the back half of earnings is going to make a difference. the one good side is you have added 600 billion dollars to money market funds over the last 12 to 14 months. you are getting an income from

your investments that you privily -- previously were not. if we are going to get a slowdown, it has to come from the labor side. it has really held up the market and the economy. tom: you are in the simulator right now, and you are way too modest about your success about having the courage to be in this market. you say that we continue, but we continue without key rotation. what you mean that we are not going to rotate? >> banks have a lot more sensitivity to the economy. they have been sensitive to do that for fear that the fed may have over tightened.

people are starting to get more confident and cyclical. we are still a little bit cautious about it. it is a little bit hard to jump with both feet into that part of the market, but this is a nice set up. tom: can you acquire shares today trading at 35 and 45 multiples? >> these are the parts of the market that are targeting growth, so we do think that part of the market could continue to work. risk and reward is not what it was. there are some things that you need to be careful of. tom: every legal beagle is

saying this is anathema. how can you suggest multiple stocks? you said to load the boat. jonathan: help me understand how cyclical someone's tech names actually are? >> the more cyclical parts of tech, they are the parts of the market where you want to be a little bit more careful. it is creating a significant challenge. both of those areas at the industry group level, you become worried about them, but you have the strongest single stock stories. the valuations expand and valuation is quite high. they need to satisfy the sentiment and keep the spirit

going in those stocks. they could nail the number and the instance is not as exciting as people would hope for. it is a big test. jonathan: we have seen from netflix this morning, the outlook for revenue is not so great. i want to understand how you want to play this. what is the focus now? >> you have two choices. you could be in a more defensive portfolio. as you know, our view has been to be in tech and growth. right now, you need something that if the cyclical market takes off, you can participate in that.

the biggest candidates would be cyclical goods, and energy would also fall in there as well. tom: this is an acceleration form. it adds to your total return. can i get convexity to the upside in tech? >> it is a little hard right now. if you are going to do that, you are moving down the structure. you stay intact, but you are in your smaller software companies. international, you can. brazil was a popular trade for the last couple of months because people are expecting rate cuts there. it is a difficult market. this is being selective about the areas that you want. if you think about the set up in tech, people sold massively in that sector and sentiment was

negative. what we lack is the catalyst. we had earnings coming out and ai that trigger ash triggered a reversal. opec has not worked on the bank side. if you got a lot of commentary, the banks could work. you are searching for the catalyst. jonathan: is it going to be a headwind or a tailwind in the second half? >> it looks like a bit of a headwind for growth. there is a meeting coming up. they are hopeful about stories out of there. but generally speaking, at this point, you hope that china does not disrupt things.

that is how people are positioned there. jonathan: how has the conversation changed around the federal reserve? >> the conversation is down quite a bit. the fed themselves were aggressively talking about equities being too high. even they are not talking about markets as much. the question is why we assume that they are going to hike in july. skipping september would be the base case. i do not think they went to be seen as being completely done with the cycle, so they need to hike in july. there are two things that people are focused on. habit a message around that? do they need to play with the longer term as a message to the market that even though we are slow, we remain hawkish on posture?

jonathan: you love the site again, don't you? tom: he has a ham and cheese sandwich. jonathan: you cannot put it back in, can you? toothpaste out of the tube? tom: we say you cannot put the genie back in the bottle. jonathan: same thing. he has moved on. tom: they want convexity at budapest. that is all there is to it. jonathan: looking forward to football coming back as well. i site makes some news on that. domestic u.k., local newspaper

is now. >> home of the beatles. jonathan: if you are wondering what on earth this is, welcome to the program. coming up a little bit later, we will catch up with peter. we will get our teeth into what is going on domestically, but also to the point, what is going to happen? is it going to be a tailwind for growth or a headwind? tom: i would suggest that they have limited choice. it is about employing people, whether it is fancy or middle, or a staggering poverty and low wage across china. they are going to make those decisions as we go through. jonathan: we will get to one of

your favorites with a 210 year spread at -103 basis points. we really have not backed away from that. tom: there is economic data coming out for the coverage. jonathan: 10 of earnings out there. it starts to ramp up through next week. tesla, netflix, united this morning. american airlines getting it done. more on earnings in america, coming up next. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first.

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>> he had our nation's secrets at blago and then he had about it and instructed his lawyers to lie, and lied to his own lawyers. it put a lot of loyal, patriotic americans at risk. jonathan: that was a conversation on balance of power. august 23 will be the first debate for republicans to become the primary candidate. it is just around the corner.

jobless claims coming into all of that. a flavor of things because asset. yields are higher. not doing much against the euro. a turn to single names this morning. up by 6% in the premarket. see quarter. ultimately, for the airlines in america, let's not allow that moved to shake that -- shape the narrative for airlines stocks. a boom for the travel industry.

three are in top performance stocks for this year. tom: two years ago or three years ago, he was talking about international coming to the rescue. to me, it is a huge international story. i do not see them giving us the kind of headlines we get from the majors. i want to get this one question in. she is the starlet of balance of power and joins us this morning. it explains our global audience. chris christie, i saw a beautiful artwork the other day. he has 2% polling. what is the hope and prayer for someone like chris christie with 2% polling?

>> there rt to be of things. he has a mission in this race. it is difficult for that serenity, given the fact he was an ally, but clearly he is not and is one of the few on the stage of republican candidates who is willing to go after trump aggressively. he is pulling in new hampshire, but third with a 6% handle. he will remind you what the polls were showing at this time in 2015. jeb bush was north of 20% and donald was at 1%. that is a historical statistic that he likes to remind viewers about.

tom: in the washington post, this is out there in the zeitgeist as well. we have reached a new stage in ukraine. he added that we have world war i like activity in the south of ukraine and now we are learning that ukraine is using cluster bombs. is this a new stage of infantry combat in ukraine? >> it is they got the cluster bombs from the u.s. and they are being used on the battlefield. i would say the speed at which these munitions were announced, about two weeks ago, to being used today is pretty rapid. it is controversial, these cluster munitions. it was controversial at the nato meeting i was at in lithuania.

about two thirds of the countries in the alliance are against using these cluster munitions. in the end, they backed them because russia has been using cluster munitions throughout this work, and it has been difficult for the ukrainians to fight back. of course, there are also all these landmines that ukraine is trying to dig around, to fight this war. it was very controversial. the washington post has said that they are being used. there is one thing that we should note. president putin recently gave an interview to say that there would be consequences if ukraine used these cluster munitions, the same bombs that he has been using. jonathan: did you get a feel

from chris christie about how this topic, the war in ukraine will play out next month? >> he was pretty direct that he supports the u.s. sending aid to ukraine. he has been very critical about how former president trump has talked about putin in this war. he does not think this is a territorial dispute. he says this is a brutal invasion into ukraine, and he was very supportive of u.s. aid going to ukraine. this has been one of those issues that you have seen, a spectrum of candidates in the republican party. you had mike pence going to achieve, but mike pence is very hawkish on this. governor desantis called it a territorial dispute and then had to walk that back and ramp up

his rhetoric against russia and for ukraine. this is one of those moments where chris christie will come off on the hawkish side. jonathan: that does not pull well with the pardon. that might help you win the campaign for president, perhaps, to bring two parties together, but will it help you win a primary? >> it is all about how they explain. the concern is about the money being spent. many americans are feeling high inflation, higher grocery bills and higher gas. these are things that are ingrained in consumers' minds. when you hear from those who are hawkish, you have to stand with your allies, and he would not want this to spread.

a similar message from the biden administration. we should note that recently, when there was an amendment on the house floor, it was struck down some of that funding. yes, some republicans voted against that, but there is bipartisan support from republicans to send aid to ukraine. jonathan: let me share the results with you. the republicans say they are giving too much aid to ukraine. just 14% of democrats and democratic leaders view the current level of u.s. aid as excessive. there is a clear divide right now the -- between parties. tom: i have alluded to the silent majority and maybe there is a majority.

we talked about this idea and we do not do the 30 year war but when gone from our short words so iraq and afghanistan, that is the real fear is another long war. jonathan: you i. from new york city, this is bloomberg. ♪ rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants.

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it's everything. jonathan: good morning. 20 still to come. we look into to that in a moment. let me give you a snapshot of the bonds and equities. we will get to some single names. negative by 0.16% on the s&p. nasdaq, heavy tech waiting. -0.7%. great run. 0.4%. they are going to go into the dial. in the last hour, he thinks this could continue. some risk assets and fundamentals are still supportive.

he thinks inflation will start to climb again. yields are up. on a 10 year, 379. it is deeply inverted. 100 basis points. tom: still living this morning. jonathan: look out for that conversation on what is happening with the yield curve. the euro versus the u.s. dollar now. let's look at some single names and start with what happened after the close yesterday evening starting with netflix and tesla. tesla is down this morning. elon musk came on the call and said it does not make sense to sacrifice margins to make more vehicles. there will be an increase, if they can do something with

autonomous driving. massive gains on tesla. how do you over the next week? tom: or you encourage stability. maybe it is time for a timeout, to just rest forward and execute the business plan. jonathan: let's turn to netflix as well. great subscriber growth look out for that conversation as well, but netflix coming out with a pretty subdued outlook for revenue. if you want some good news, go to the cyclicals. it is phenomenal this year. it plays into the story in a massive way. the solution for not want to

sell their homes right now. a big raise of 3.8% of the market. tom: horton might disagree with me, but these are fancy homes for fancy people. that is the kind of economy that we are in right now. this is to come forward in the tech earnings. it is a continuation of the great zombie rollup that i have been talking about. some of the nuances coming out today with really good numbers, and they are doing a spinoff. it is called some goofy thing. again, corporations adapting, and part of that will be a rollup. who rolls up the rest of the industry? it is a complete mystery.

profitability. jonathan: the full content with a strike ongoing in hollywood. i want to turn to the airlines. decent numbers from united airlines. you talked about the new roots coming on. tom: just getting back from tokyo, he said it was spectacular. he is on the vanguard after going back there after covid. all this information on an interest rate environment harkens back 16 years. what is interesting is how corporations adapt. the assumption and the doom and gloom zeitgeist is that we are all going to roll over and die with rates where they are.

jonathan: weighing in on a slew of economic data with the 25 basis point hike christ for next week. the data continues to reinforce the notion to keep policy rates higher through the end of 2023, if not longer. tom: our interview of the day on rates. i was making jokes about it, but we remember a normal rate environment. the seal is that we are all going to die. how do we survive in a normal rate environment? >> it is your places on the curve. it is an attractive environment to be in the front end of the curve, but when that shifts, it shifts very dramatically. i suspect things will look wonderful from an economic

perspective, certainly in the context of what we would normally anticipate. come the fourth quarter, we will start to see more evidence of the cumulative impact. tom: if you are rationalizing the risk of reinvestment, is your scaled to go up to seven years or 10 years? >> i think you go to 10 years and the logic is that there is enough cyclical risk between your five and or 10 to justify lower yields, and let us not forget the 10 year treasury is the benchmark of all benchmarks. it will always be an attractive touch point. jonathan: upside risk to inflation emerging. he has been bullish this equity market and i am not going to go in that direction, but he is bullish through the end of the

summer. he thinks after summer, inflation risk comes back in. >> i am on board with the notion that once we get to the september and october numbers, we will start to get a better sense of how much housing costs. rent has moderated sustainably. if we see a return of those components, i think that will be problematic for the fed and push rate cuts even further. more importantly, the fed will focus on shifting the conversation to core services and that is the big uncertainty. if that continues to moderate, the fed can claim victory, even if core inflation researcher is towards the end of the year. jonathan: how do you think that will shape communication?

>> we are looking at a dovish hike next week. it is completely priced in at this stage, but the fed is wanting to maintain a degree of flexibility but also needs to communicate that 550 might be the terminal rate this cycle. we are looking for a press conference that echoes what we saw in june, not what we saw at humphrey hawkins. tom: because of view, but i loaded up on the austrian 117 piece. i thought it would be a great idea for the great-grandchildren. i push that down to the 275 and it has not come off the map at all. what is the risk to retail? what is the risk that you see there in retail? >> the biggest for longer, over

an extended period. if they give up the target at 2% and revises to 3%, we will actually be in a sustainably higher rate environment. tom: reaffirming a lower start as others are looking. where does the governor think that we are? questionable come to the realization that nothing has changed. tom: we could do a interviews year. this is serious. we have market die years he agrees. what did they get wrong?

>> i think that the argument breaks down once we labor force dissipation moving higher across the board with the exception of 55 and older and we see nominal wages revert to norms. tom: particularly the lower styles, where do we get back to normal wages? ? -- if we are printing with hourly earnings, the market is quickly going to move back from the higher argument. jonathan: pre-pandemic economy. is that what you are calling for? ? they got wrong was how long transitory applied for. it was four years. jonathan: what do you think the optimal policy would have been, given everything that we know now.

>> i think that the fed did the right thing and it was difficult for washington to not pump a ton of money into the system. that is what really shifted. jonathan: what could the fed have done? given what we know now, what could they have done? >> they could have stopped buying bonds sooner. we call what the fed was doing was, they were trying to make sure that the system continued to function and that the atm card worked when he went to the bank. they were playing a much longer game. jonathan: tk, transitory is extra transitory. tom: i'm going to go back to modern theory. you cannot say -- olivia calls it the bidens stimulus.

somebody gave us a stimulus. institutions had to deal with that as well. the answer is, it was not perfect policy. i think the adjustment was a little bit tardy, but that is all 2020 hindsight. it is like looking at ricardo this weekend. jonathan: i think ian made the right point. a lot of people were screaming about qt. it was so slow. tom: the partition of the balance sheet debate versus conventional debate was understated. jonathan: if you are just tuning in, welcome to the program. equities yields are high by a

few basis points. when is our next therapy session? tom: yeah not doing those anymore. jonathan: i am impressed that you did not call him david. tom: david from sydney to perth, they had a fundamental impact on economics. can you imagine if he does well this weekend? jonathan: i do not know what well is. tom: it is a 12 and it ends up at eight. it was great. quality is friday in the morning. jonathan: so there is a ring race. tom: we are doing big little on it. we will have us here and we will have qualities.

jonathan: i will check the calendar again. we are going to talk about netflix again. netflix is down in the premarket and have come out with massive subs, but the revenue line is a little bit confusing for some people out there. we will talk about that in a moment. and the competition and the strikes. writer strikes in hollywood and beyond. from new york city, this is bloomberg. ♪

>> only a small percentage of our members -- nice growth, but still off a wall base. we are early in terms of impacts, including building up

over multiple quarters. jonathan: something to talk about in just a moment. the stock is down. an example this morning of how difficult it is to validate big games today. it was up before these numbers drop. tom: it will be interest you at bloomberg surveillance is that we talk to expert. to the looks that business. john and i both missed the big bull market move. i'm going to go to gwendolyn christie, who hit the ball out of the park in game of thrones. she showed up with a tv script on her desk and does this thing called wednesday, and all of a sudden, they hit the ball out of the park. how much is netflix beholden to finding the next wednesday

atoms? >> it is still is ironic, given how big the library is and how many shows and movies are always coming on. it is a driven business. nobody saw squid game coming and that is the number one watched show on netflix. they do have a big reduction pipeline and a lot of big shows coming. they seem to generate hits at a pretty consistent basis. tom: -- >> the stock had a big run up into this big result. what i found a little bit puzzling about the result is that the number that investors seemed to look to the most, it

is not -- this quarter, given the launch of the page sharing system in the u.s., but hundred countries around the world, it was a good number. by the revenue performance was actually on the light side. that was the main concern amongst the analysts on the call. the revenue that including u.s. and canada, which was surprising. the free cash flow was strong. it is now nearly $5 billion of cash flow this year and some of that is strike induced without production going on, but that number could trace back again next year. all in all, we have a mixed

report from netflix, some of it good and some uncertain. jonathan: at first look, i was confused by it. how can you come in light on revenue? how does that work? >> we struggled with it and a lot of the community was struggling with this as well. part of the explanation is that outside the u.s. -- i think it is over 100 international market, netflix cut the price, so that is still working its way through. it simply means a lower arm. the confusing bit was that the u.s. and canada was also down and this is where they launched shared plan. if you get the account owner to add you on, contribute an extra seven to eight dollars per month from that member. anybody that does not ask the

account owner to add them can take the advertising plan, which is $15.50 per month, which is higher than the base plan. it seems like that number should have gone up. maybe a little bit of canadian foreign exchange brought that down, but it is not clear to me why that number was down. jonathan: most people think that the strakes are a nonevent for this stock, for this company. do you agree with that? >> if you told me the strike would last one more week, then it is a nonevent, six more months and it becomes an event for netflix and everybody else. netflix has a huge library and a huge contribution. but also just a very long pipeline. it takes up to two years to make

a tv series. short-term effect, minimal. a little bit of free cash flow bump up because of a lack of spending. the longer the strikes go, the more that production pipeline is frozen and the more you are pushing the issue into future periods. tom: i have to run an audible right now. warner bros. digital, you have a pop to 22 on it and you are hugely bullish. he has 57% debt and it is do something. what are they going to do? >> warner bros. discovery has an interesting opportunity to create the next large,

all-purpose streaming service. you have hbo content, warner bros., studio content, turner, which includes a good deal of sports. that is especially if the mba contract gets renewed. it has an opportunity. it can become a major streaming service along the lines of disney plus, netflix and amazon prime. i think it has that opportunity. the debt is a concern for many people. they are taking steps to reduce that through relatively minor asset sales. there is some debt incoming, which i believe they can handle. the weekend market is troublesome for that, but this company has a history of aggressively paying down debt when it does deals. if they can get in the long.

i think the stock is attractive. tom: it is attractive and lessons learned. what have they learned in the last 12 months to reduce the debt and drive the business plan that you describe forward? >> i would say that the debt load was raised to take on the assets. the expectation was that they would generate a certain amount of cash. this is over many years. to your point, one lesson being learned is that this is a major undertaking to put these together. it is a different kind of business.

a different kind of content, different demands and all that kind of stuff, all that into one major prize, a lot of cost-cutting and things that were not right when they lifted up the hood. it is a lot to manage. i still think the asset-based and the opportunity is large, if they can get through this period. jonathan: tame, you should go. tom is going to start singing. tom: he said it was frozen. jonathan: you know the words? how many times have you watched that the? tom: you are completely transfixed. that bill picked up on it, so the dogs picked up on it as well. it as well. is alicia's doing.

but the fewer thing, lisa is over there. jonathan: you had tom: they have practice and qualities. jonathan: tomorrow is saturday. you confused me. tom: i was going to watch the qualities welliver on air. jonathan: we can watch practice tomorrow, i think. >> join us. we will go big little. jonathan: do you want to watch the qualities together? you bring the beers and i will make it happen. futures, 0.1%. ♪

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>> when we think about how long the market can ride a momentum, quite long. >> we get a slowdown in not a recession. >> there is a limit to investor comfort with deteriorating

fundamentals. >> we are not taking a recession out of the cards 100%. >> the probability after july are higher than the markets are currently expecting. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. tom: it is earning central here at bloomberg. we are looking at the fed and further curve in version, 103 basis points, red and green on the screen. i am looking at east-west bancorp and twist bioscience. these are the companies we do not talk about. there is all of the big names we can talk about this morning, including the smart conversation we just had on netflix. we are now into the thick of it.

this is a big deal. jonathan: pick a stock, tell a story. it is costing more money, they had a difficult year. you look at regional banks and would say the economy is struggling, that is the story. i think the homebuilders are one of the most fascinating stories in america, the american economy, in 2023. if you said 12 months ago the interest rate at the federal reserve wouldn't be a problem, it would be a solution because it would suffocate supply because people would be unwilling to sell their home because they were sitting on such a small interest rate on a 30 year mortgage that the homebuilders -- ap and arrays, it continues. the stock is higher in the premarket. tom: 7.15%, just down from the high point.

i look at the 4% level, where john was three months ago. some 70% of mortgages are set under 4% and under 6% away from -- is 90. edge enormous number of american people saying i am happy. jonathan: what will change the supplied demand backdrop? tom: policy. the only way it will happen is some form of original anchor adjustment. other than policy adjustment, i do not see it. what is the policy adjustment at united airlines? business is terrible. 4 million flights canceled. you cannot get a seat. jonathan: what is good for the stock is not good for the consumer. discretionary spending, we talked a lot about airlines, the cruise lines. things are in a sweet spot right now.

the consensus is they remain in a sweet spot through the summer. you get deeper through summer, the consensus view starts to crack. let me give you quotes this morning. hsbc thinks support is likely to be sustained for the equity market until late summer, then inflation starts to climb again. the next few months are likely to look like a soft landing, but after that, we see upside risk to inflation and a downside risk emerging in late 2023. the summer is in debate. later after the summer, that is where the division is at the moment. tom: we used to do three year plans, nobody is doing that right now. johnson & johnson, a tenure track record. single digit total return performance. getting a five-year dividend growth and clocking a multiple

of 15 or 16 on j&j, that is what so many guests talk about. we'll re-rotate from apple to band-aids? jonathan: discretionary beyond to cyclicals. that is the simple way of asking the question. tom: bramo is off in norway somewhere. they do the fjords for one day, then go over. they are bouncing around and go over. it is not like you are sitting with a rum toddy in your hand, she has got the full regalia. they are looking for polar bears. jonathan: she strikes me as the kind of person to go on that vacation. tom: she is off with the polar bears. that is what you do. jonathan: with the family?

tom: i think it is too risky for the family. the kids are at some camp somewhere. jonathan: bramo will be back for the fed decision. tom: i believe friday morning, she is back in norway. jonathan: equities on the s&p negative, yields up by three basis points. 10-year 378. tom: we just talked to ian lyngen, hugely acute on the bond market. we talked to someone more conceptual, but just as wonderful. peter tchir joins us. how do you get out beyond labor day? peter: i think it is difficult. we have got to get through summer jobs numbers.

we are going to see headwinds on the jobs numbers, i think we will see deflationary pressures. that will kick in into the fall. right now, it is all about earnings. i think we will see a rotation where the laggards that bought, rebalancing going on on friday. people are seeing the trade work. i think you will see underperformance. i think that is the trade for august and september is unclear. tom: the unclear of it all is down to nominal gdp, plus inflation overlay on top of it. are you constructive the machine can continue to develop 4% nominal gdp per year? peter: i think we can get to 4% nominal gdp. we do not want real rates above 1%. if we start seeing nominal gdp tick down, i think it will be a

function of slower overall gdp and less inflation. that will drive the fed decision late this year, early next year. for the next three to four months, i think the fed is a nonfactor. they will hike in july and that is about it. jonathan: let us work through the next three months. you have shifted away to equal weight on the s&p 500, what changed for you that got you around to the view that this could broaden out? peter: you are seeing leaders not do quite as well and you are starting to see the story broaden. if we are getting a soft landing or some sort of period that is not a minute recession, that is where people have to look. even conceptually ai. if ai is going to work, it is going to work for individual companies as they figure out how to be more strategic. i think you will see the chasing of that. i am worried it is consensus,

people have been piling in for the last month and it is not working. we are poised with this rebalancing that is going to occur on friday, we can finally see it catch up. jonathan: do you think that optimism -- sorry for jumping in. do you think that spreads from equity to credit? high-yield spreads are tight going into this. peter: you will see credit spreads continue to grind tighter, there is a lot of fear. people are talking about a wall of debt maturities. overall quality of issuer is better, banks have been getting rid of hung inventory of bad commitments made during the peak. with the lack of supply, i think spreads grind tighter. if high-yield spreads can go further tighter, that ties well into a rally in the russell

2000. jonathan: equal weight and small-cap, constructive on high-yield credit. here is a risk factor, real estate. can you weigh in on commercial real estate and why you do not think it is a broad problem, but a regional problem? peter: i think it will be very local. areas like san francisco, there was a lot of money invested at the peak. as people start seeing more pressure moving away from work from home, that will help some of the space. these things take time to bleed out. i want to tie it back to comments earlier about homebuilders. there is a trend of where people are moving. homebuilders can do well when people move to new areas. that trend into other regions helps homebuilders. i am trying to get down on the economy, looking at it region by region. we are starting to see a separation.

if you caught that on homebuilders, with everyone moving to tennessee, florida and texas, there is a great opportunity for homebuilders even with higher mortgage rates. there will be problem areas, some good areas. even problem areas will take longer to play out. jonathan: is that long texas, short new jersey? peter: i have been on some of the cre stocks for a while, preparing gains. everyone was so doom and gloom. that is one of the things we look at. the great financial crisis took years to play out, a long period of time. it was not until october 2008 you had a lehman moment. i think people got ahead of themselves, banks have a lovely way to figure these things out. there is a lot of pressure to move away from work from home back to work from office.

jonathan: everyone is so harsh on new jersey. you notice that? they give new jersey such a hard time, i never understood. everyone loves the hamptons, but jersey shore -- what is that about? i do not get it. massively. the beaches at the hamptons are not that nice. tom: when you start in on this, the hair curls, she gets it. she is all jersey shore. she has got 6000 square feet down there. jonathan: jump in, bound means. peter: one of our clients always wants to use the term jersey math on live tv. i do not know what that means. jonathan: do we get a share of that? peter: hopefully we will get a shout out. jonathan: the guests come on that have a bit to say a word, i did not realize he was one of those.

pete, thank you. equity market on the s&p 500 just a little softer, negative by 0.2%. coming up shortly, we will catch up with stephen trent of citi. tom: these are acute notes about what they are doing and what the headlines say. there is one industry with the separation of the business plan and financial statements from the emotion in the media cannot be greater than the airline business. jonathan: american also gets in on the act. tom: i think you have a huge -- my amateur take is there is a cyclical history of everybody on a board. the romance of and all that. then oops, there are too many flights, too many seats. jonathan: they are disciplined

about capacity. tom: he said it, there is a new discipline out there. jonathan: look forward to that. peter hooper of deutsche bank coming up shortly. airlines in america, that conversation is coming up next. ♪

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>> there is more upside to the economy down not, but we are growing above potential. whatever unemployment rate increase you see, it is probably going to be short-lived. we are not in a situation where we will see above 4% unemployment. jonathan: good morning to you, the s&p 500 equity futures look a little something like this. negative by 0.2 percent, tons of earnings out there. yields higher by four basis points. in the commodity market, crude is higher by 2/10 of 1%. wheat prices are surging. as you are aware, the u.s. has

warned that russia has laid minds at ukrainian grain ports, there is huge concern about supply out of the country. tom: the tangible news flow as annmarie hordern briefed us on, i want to emphasize to people off the radar, this is an active story in ukraine. the force of his language about the to do list for america as ukraine devolves in the south into world war i like or fear is tangible. jonathan: just to squeeze in this headline from moments ago, ships heading to russa -- russia black seaports may be targeted. tom: this is something we will watch today and look for balance of power tonight ryan sure we will be briefed on ukraine and the american response. steve trent is known for writing

acutely detailed change notes on the airline business, holding on the dartmouth bubble for four years. he took talk into a six-year program just to hang out with l.l. bean on up in dartmouth. steve trent joins us this morning. you learned that business plans matter and strategic vision matters. which united states airline has the best business plan? steve: thanks for having me on and for the warm welcome, i appreciate that. when we think about u.s. airlines, i am impressed with delta and i think united knows what it is doing in terms of its long-term fleeting effort. delta airlines, as well.

both of them, what we are seeing , that is the place where one year from now, we will be talking about how good a revenue is. those two carriers are very well positioned for the longer-term upside. i think their strategy on that regard has been intentional. jonathan: why isn't american in that sweet spot? steve: in american's, they have definitely done a better job. the q2 print was above. when we think about how they are set up structurally, they do not have as much metal on the transatlantic or trans pacific exposures on those core doors. you can kind of dig down deeper, for example, into credit card

and loyalty. that is a piece of the pie that elements of the market ignore sometimes. if you look at delta's program with american express, what all of that telegraphs in terms of delta's is a counterparty, that revenue is still really surging in the right direction and american, probably from a counterparty profile, does not get the same premium that delta and united do. jonathan: when i see the massive lines at jfk to get into the delta airlines lounge, that is good news? steve: that might not always be the best news for the consumer. that is probably very good news for the shareholder. when we look at the normal post-pandemic world out there, delta has been really good -- united as well, at optimizing

the passenger outreach. tom: we need bloomberg terminal's along the way. so they can get their quotes. what i love about your note is you get granular about looking out weeks and months. you mentioned october looks pretty good, is your belief in guessing revenue, guessing number of fanning's in the seat, is your belief like it was pre-pandemic, or is there a mystery to it? steve: i would say it looks like demand patterns have modestly changed, versus pre-pandemic. this is partially a consequence of many people no longer working in the office monday through friday. the lifestyle adjustment we believe has influenced the way

consumers make purchasing decisions and the way they make decisions about purchasing airline tickets. when we look at the data through october, the booking curve in this first batch of data that we got looks very good. one of the things we have seen in the last year and a half's advanced bookings much stronger than they used to be pre-pandemic. we think that is one sort of symptom, so to speak, of the nature of post-pandemic travel. tom: jane from scotland says she hopes you are working five days a week and not working from home. when you look at the aviation business -- i am going back to the wonderful conversations i had with one of my heroes who basically invented price discrimination of the cabin. will it be business as usual?

out three years or five years, is there an airline new world, airline persistency of free cash flow that makes it more quality than the crazy world we knew? steve: one of the things that is definitely going to be different for a while is capacity. some of that is coming from manufacturers. you had pandemic era supply chain issues, there are some indication those issues are improving. but there is still a lot they have to dig through. it still takes a long time for airlines to get planes. you have engines and spare parts that are hard to come by, then the pilots. it is a little difficult to see the pilot situation normalizing the next 2, 3 or four years.

so you have a bottleneck out there that is hard to solve. that, layered over what we see as cyclical demand trends, capacity should be constrained. capacity remains below 2019 levels, that is something that takes a very long time to change. jonathan: this was great, let us do it again. can we get the board back up? look at gains for the airlines. united, american, delta. up by more than 45% across the board. gains on the airlines have been phenomenal. tom: what is fascinating is wall street is focused on major airlines. i am interested in the other airlines we fly all the time that no one is talking about, including jetblue. i have never been on spirit.

jonathan: everything you said was good for shareholders to terrible for consumers, did you notice that? tom: that is steve trent. he sits in the front row. jonathan: coming up shortly, emily roland on the market. constructive, not so much anymore. we will catch up with barry around the opening bell. ♪

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it's everything. jon: -- tom: "bloomberg surveillance tom: "bloomberg surveillance there are a number of ways of looking at claims. michael mckee has to really dive into the minutia here. as well as the revised numbers. i would suggest recently revised numbers have taken on a new importance in weight. with our data this morning, which again is slow. there it is. finance, come on. what are we seeing in claims? mike: good news if you are someone who wants to see the labor market remain tight.

228,000 is the number. 237,000 is the unadjusted number. i'm still waiting for the revisions to drop. a lot of people are trying to hit the website at this time. continuing claims are also up a little bit. 154's -- 1,754,000 as opposed to 1,000,700 21. the revision on that number. that's a bit at her. the philadelphia fed business outlook is little changed. -13.5, had been -13.7. the prior month the new orders index, -15 versus -11. employment is negative one versus -.4. the prices paid index file -- falls to 9.5 from 10.5. on inflation basis, reasonable news out of philadelphia but

overall numbers not as good as they could be. tom: spx, netiquette of. dow, positive. seven basis points, 4.84% on the two-year. i want to get in front of home sales at 10:00 a.m. and case-shiller on july 20. does the fed care about the housing market or is that tangential to the debate? mike: they care because it is sensitive to interest rates and has a big spillover effect on the overall economy but we have seen home sales just kind of stop, existing home sales. no one wants to trade their mortgage. 90%, 91% of americans with mortgages have them under 6%, close to 5%. now you are looking at 7% as the national average. who wants to do that? everyone is piling into new-home sales. tom: stay with us as we have a

conversation with the global head of international research from deutsche bank going into the distant and dark past. peter hooper joins us this morning on this american economy . the communication of the modern fed. i used to look at this with fond memories of trying to figure out the pipe smoke as it came up from arthur as well. you have seen the fed from smoke analysis to the sandwich that greenspan is having. larry myers, furious at the lack of communication to the dispersion of all we see. has this communication has been fed from hooper to burns? >> a remarkable transition in fed communication over the time you're talking about. used to be that greenspan was happy if two newspapers came out

with opposing headlines over what the fed had just done. titans, eases. now transparency, being clear as possible, really is the strong push and i think the fed is doing a very good job. i think that what we are in the middle of is a fed that has slowed to the pace of a rate every other meeting. it's the off meeting where they are hiking rate. giving them a chance in the on meeting to give a clear signal. which way they might go in the next meeting. tom: the optionality going forward and the data, if they have to work after the fact or ex post, right now to jackson hole and beyond, do they have good optionality around which way to move? peter: very much so.

we are all expecting rate hikes next week. right? that's in the cards. then the question is what kind of signal do they give us for september and the timing of the next possible rate hike being the october november meeting? we will have three, three more employment reports. three more inflation reports. two more of each before they can give us a signal in september about the possibility of moving again in october november. the current work asked, the meeting s.a.p., says it will go october november. we think it will be september and done because the economy is moving in the right direction, though the claims numbers do not help us. [laughter] jon: do you ever wish -- tom: do you ever wish that you were mike mckee in the press conference? with the last question? peter: mike has a dream job. [laughter] mike: i can't remember how tom put it when he was introducing

you from the deep arc past, but i'm there with you, we go back a long way. i can't remember a time when future fed policy has been as undecipherable as it is now. this is not the gang of four kind of disagreement on the fed that got rid of paul volcker but there is still a lot of disagreement among members of the open market committee around what should be done next. does it take it difficult for people on wall street, for investors to go about their duties when they don't know what the fed is going to be doing? they told us what they were going to do for so long. peter: i have had two careers. my first 25 at the fed, second 25 at deutsche bank in the markets. going back to the first 25, this fed is unusually unanimous in their view. you have no disagreement about

the fact that they need to have a, keep with a tightening -- tightening bias at this point. yes numbers are starting to go the right way but we are not out of the woods by a longshot. labor markets are still very tight. core inflation is still much higher than they want to see it, eventually. so i think yes, you are getting some signals that are more positive which might be concerning -- confusing some of the market, a one and done. matt was eddie, my good colleague and i, putting out a piece yesterday on is, is a recession more likely than a soft landing, still? it's now a very close call and those are circumstances that say yes, it's going to be confusing, it's going to be difficult. you are at a critical point where they didn't need to keep

coming in but the data aren't there yet. it's a difficult time to be clear about your intentions. mike: going back, is the labor market really tight? from the financial times, we have a great economics writer posing that russian. he's looking at average weekly hours. -- the hours worked are lower in almost every category since pandemic. if the labor market was really tight and people couldn't find work, wouldn't the current workers be working more and if the fed is raising rates, shouldn't we see claims going up? peter: you can see some signals looking easier but wage inflation has peaked, is may be coming down, but it is still 5% plus and needs to come down to be consistent with the fed target even productivity. yes, the claims numbers, sorry, the open-ended job vacancy rate

has been coming down and that's a good sign, but there is still 1.6 openings for every unemployed worker. that's a very tight labor market. getting down 1-1, you start to ease up a bit. tom: got to change gears here. the worsening situation in ukraine. cluster bombs reported today. david was with us the day of the invasion, i think. you may have been in london at the time. but the biggest point was that at some point there would be massive government investment in europe. i guess we are not there yet. recession in germany. manufacturing challenges. what is the deutsche bank view of how the war affects the european economy after 12 months, 24 months? peter: our view is that the war

is going to persist and background and or ground factor on the geopolitical side. on the economic side the expectation is that the slowing we have seen from energy price increases it has not been as severe as was feared. but at this point the economy is still pretty, pretty hot in terms of labor markets, inflation to high, the bigger driving factor being what the ecb does. one more and done for the ecb as well, but that will be slowing things with the war in the background is a factor. looking beyond the next 12 month , i should say that there is a lot of investment to go on. tom: the politics out of the netherlands, forgetting about that politics, does the core of europe have a hawkish tilt that

lagarde and company cannot ignore? peter: this week they turned a little bit more dovish. they might be saying look, we may be one and done. that's a possibility. the court of europe is concerned about inflation, certainly. they want to see the ecb follow-through as needed. the picture in europe is, as in the u.s., you are beginning to see some signs. tom: getting out to september is an easy exercise but help me with that third week of november. mike: as peter mentioned, there should be a lot of data and then you have got to go into

november. it's hard to make a call at this point. if we see the same kind of improvement in inflation that we have seen but without a change in the labor market, does the fed make policy based on what they are worried about or what they actually see? tom: inflation adjustment with the dr. hooper comments, 10 year yield over recent highs at 1.56 on a solid six basis points higher, 3.81 percent in the equity space. s&p 500 futures are down 3/10 of 1%. we say good morning on bloomberg surveillance, radio, and television as we nudge ourselves towards a fed meeting. i'm hoping, is it quiet now? mike: we are quiet, yes. tom: what do they do, vacation? mike: actually they work in the

week up to the event that the staff is putting together. the forecast that they will use internally, they do one each time and they are talking to the researchers. tom: they are learning. this is something greenspan codified. peter hooper mentioned the path back and as well as this there's the whole deutsche bank architecture that's data-driven. what data do they look at? at the kansas city fed i assume they look at data differently than the san francisco fed. mike: yes and no. they all have their own indicators and models that they look at and login their data but they are all kind of focused on the same two things. one is the tightness of the labor market in two is the tightness of wages on inflation below the headline numbers setting us up for the future. do we still see a lot of sticky prices not coming down in

services? what we saw last month in cpi continued because race affects go away. they are trying to model that. we didn't get to ask peter about it, but the dollar is going down and is that going to continue? what kind of impact is not going to have if the ecb stops raising rates? do we see the dollar strengthening? tom: 112 after a sprightly 5, 6, 7 days for the euro. stay with us on radio, television. from new york, this is "bloomberg surveillance." ♪

>> i actually think there is some scope or resilience still at the high end of the high yield sector because supply has been so low. over time i would expect there to be more weakness in the market as we see defaults float through risk premium rebuild.

importantly, we don't view recession as a necessary ingredient for uptick. tom: selling forward. go to bloomberg.com, go to our digital product on youtube and search for amanda lyons. this was a tour de force conversation on commercial real estate. for those of you foreseeing a shining sea, this may not be a focus to tell you on any urban environment skyscrapers over 20 or 30 stories. this is front and center. it's ugly out there. amanda lion of blackrock was really blunt. futures, nasdaq down 8/10 of 1%, giving us some netflix and tesla angst. we will have full coverage of that this afternoon. the vix at a 14 print crisis out

of 13. showing a true tension in the bear market to come. bitcoin, above 30,000. yield space showing economic data with 104 at a 2/10 spread. that's a big number with further inversion. right now, and this is a joy, we are going to stop in the doldrums of july. it's not the killer heat. a little bit hot but we are going to stop on a lazy thursday morning for someone with courage to participate in the market. gina martin adams, chief equity strategist at bloomberg intelligence. you know the maximum, flunking this in the cfa exam, to generalize, if you miss the 10 best days of a market over 20 years, forever, 30 years, you give up a huge amount of your

total return. you have got to be in the market to win. how do people scared stiff by their first share in this market? i think -- gina: i think part of the reason people have been scared is the macro economic forecast. economists anticipating recession that has yet to emerge according to official data but one thing that can help investors regain a degree of confidence is the price trend itself. in a report this week we noted that we reached 76% retracement in the peak to trough decline in the s&p 500 and every single time we have reached such a retracement after a bear market it has led to future gains in the past. so the technicals themselves can provide a bit of confidence. the technicals breaking out this spring really added fuel to the market fire this summer where we are starting to see broadening

advances and one of the biggest skepticism's has of course been the concentration of gains, where everyone knows the biggest seven stocks, they have driven 70% of the gain in the index this year and over the last six weeks we are starting to see a broader market trend developing, the whole index trading above the moving average, helping to regain confidence as well. but frankly until we can really get a lot more confidence about the macro economic outlook, the market will have to face fits and starts of sentiment. tom: i take real issue with sophomoric focus when i see spx trailing up 18%. i get it, we went down big, we come down big. define how you defy a broadening market. what tools do you use at bloomberg intelligence? gina: we look at things like i

mentioned, percentage of stocks trading above the moving average and gains over the last month. financials is a good example. over the last month the banks are some of the leading stocks in the s&p 500. small caps as well. the weighted index. across-the-board, when you look at the market access you have seen advances over the last six weeks. it's a relatively new trend of that we need to see sustain itself through earnings season and we are just getting into the thick of earnings and in the next few weeks we will get the bulk for the non-financial sectors with tech included and industrials, materials, they need to start participating to a greater degree in the rally. small caps are an interesting place. we have never seen this divergent degree between large and small caps enable market advance. if large caps are telling you

it's a new bull market according to historical evidence, they have only retrace less than 40% of their decline so far. that degree of divergence has never been seen before following a bear market rally. or a new bull market emerging. i do think we want to watch small caps really carefully, look at the profitable enterprises for signs of fraud, may be signs of healing, leading to much better economic conditions that could address the sentiment issue we were talking about before. tom: my theme for thursday was profitability thursday and i take this from the london school of economics where they said profitability was everything. that's fine but this does not grab and coddle net income. how does gina martin adams define profitability? free cash flow? some a special ratio? i don't know.

gina: across the board in different ways. for real estate it's this thought -- defined for me than the rest of the index of one thing we have been watching carefully over the past two years as evidence of profitability or lack thereof is operating margins, we specifically look at them for a core set of companies in the s&p 500 that tend to lead trends in the broader indicator like net income or even sales growth. what we want to see is operating margins continue to heal. the good news here is that exploiting the energy sector, huge input, operating margins showed their first sign of improvement in the first order earnings season. we need to see that continue over the next several weeks. this is the most important line for people watching, my opinion. tom: operating margins improving because of cost-cutting or operating margins improving

because revenue surprise is higher? gina: it's an excellent point and something we are watching carefully as well. so far it's all about cost-cutting. it will probably continue to be all about cost-cutting and reduced inflation pressures that have emerged so far this year. that is typically enough. at this stage it's typically enough to see reduced inflation pressures using worries about the earnings stream. you cannot have revenue decelerate too much to deplete the optimism emerging in margins. revenue is something to watch but it is too early to start to think revenues could improve for most of the index beyond the communications sector. if it does, that only adds a massive leg of optimism that no one is expecting. tom: let's take a stock that makes band-aids and a lotion as an example.

i'm looking at a 1516 multiple versus the walmart 2425 multiple. figure it out on radio, it's johnson & johnson. way to nail that, amy. she nailed that for us in the control room. is it a value trap to look at things that haven't moved yet? or is there a real ability to pop? gina: it's difficult for me to brush there are segments in small caps where the on profitability or lack of profits is going to be a persistent drag and is definitely an extreme risk. within the large-cap index there has been such concentration in the top seven in terms of optimism. you do see plenty of opportunities in the top seven and outside the tech sector specifically where investors have just sort of ignored anything going on.

attached any degree of risk. you would expect there are probably some opportunities there but when i say it is all value stocks, i can't say that necessarily because there is a lot to be done beneath that headline and you want to watch things like where are the margin gains starting to surface and where our companies cutting costs enough to right size their costs structure for a different environment into the second half of this year and into 2024? tom: gina martin adams, a window there into thinking about how to be in the market if you are scared stiff. this guy started out writing code. total nerdfest. contact computer, a few years back. john william burley is that benchmark capital with emily chain -- emily chang on the circuit. timely, to say the least. ♪

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jonathan: live from new york city, good morning. three day winning streak on the s&p 500. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york, coming up the outlook for revenue and netflix under worms. tesla committed to chasing volume over profit as cyclicals begin to justify a better tone. can a big winners validate big